The New York City Department of Consumer and Worker Protection (“DCWP”) has proposed a new rule aimed at regulating use of AI chatbots in the customer service setting, or “automated customer service systems.” The proposed rule defines an “automated customer service system” broadly to mean “any technology used to provide consumers with customer service where all or substantially all the communication to the consumer is made by such technology rather than by a natural person.”
If finalized, the rule would require businesses to disclose when a customer is talking to an automated customer service system as opposed to a human representative, require businesses to provide an easy way to navigate to speaking with a human representative, prohibit businesses from evading responsibility for using AI that results in unlawful conduct, and require businesses to offer reasonable and timely customer assistance if it is advertised.
The proposed rule also includes a recordkeeping component, requiring businesses that use automated customer service systems to create and retain records demonstrating compliance with the requirements of the rule for a period of at least three years. Violators would be liable for restitution and civil penalties. The proposed rule includes a penalty schedule with proposed fines of $525 for the first violation, $1,050 for the second violation, and $3,500 for the third and subsequent violations.
DCWP plans to hold a public hearing on the proposed rule on November 19, 2026, with comments due on or before that date.
This proposed rule should be viewed in the context of the other actions taken by DCWP and Mayor Mamdani with respect to consumer protection issues. Specifically, earlier this year DCWP proposed a junk fee rule requiring businesses to advertise the total price for any good or service, including all mandatory fees and charges. Further, through Executive Orders 9 and 10, Mayor Mamdani has taken steps to combat hidden junk fees and subscription issues. DCWP is clearly being very active in the consumer protection space, and businesses with customers in New York City should continue to monitor the rulemaking and other developments to ensure compliance with existing requirements and to prepare for new ones.
AssociateAs a member of Olshan’s Brand Management and Protection Group, Morgan helps guide clients on all facets of brand management, including privacy, advertising and intellectual property optimization, enforcement and defense ...